New Delhi: On the eve of Holi festival, the government today hiked dearness allowance (DA) by 6 per cent, benefiting over 1 crore central government employees and pensioners.

Reuters

The hike, which will cost the exchequer an additional Rs 14,724.74 crore annually, will take effect from January 1, 2016, Telecom Minister Ravi Shankar Prasad told reporters after the meeting of the Union Cabinet which took the decision.

The burden on exchequer would be Rs 6,795.5 core towards central government employees and Rs 7,929.24 crore towards pensioners during 2016-17, he said.

The DA, which will benefit, 50 lakh central government employees and 58 lakh pensioners, will go up from the existing 119 per cent to 125 per cent.

Dearness allowance is paid as a portion of basic pay of employees to neutralise the impact of inflation. Pensioners get dearness relief.

The central government revises DA twice in a year on the basis of one year average of retail inflation for industrial workers as per a pre-determined formula.

In September last year, DA was increased to 119 per cent from 113 per cent with effect from July 1, 2015.

In April last year, the government had hiked DA by 6 percentage points to 113 per cent of the basic pay with effect from January 1, 2015.PTI